Africa: Short-Term Investments Appear Promising, Yet Widespread Fracking May Inhibit Long-Term Investment Opportunities

Recently, many have found it opportune to invest in Africa. Foreign direct investment has increased by almost 50% since 2005 and the IMF has even predicted that Africa’s expected GDP growth for 2013 will be 5.7%.

According to an article in The Economist (and World Bank economist Wolfgang Fengler’s analysis), there are a number of reasons that greatly explain Africa’s recent economic growth, such as population growth, widespread urbanization, technological advancement, less corrupt government practices and better corporate governance as a whole.

Keeping Mr. Fengler’s reasons for Africa’s economic growth in mind, it is understandable that investors are finding it worthwhile to invest in Africa, at least for the time being. However, will it be so wise to invest in Africa in the next ten years? Will long-term investment opportunities exist in Africa in the future? Most likely not.

The outlook on long-term investment in Africa looks pretty bleak. One main reason for this is due to fracking, which will likely play a very large role in whether or not long-term investments in Africa will be seen as lucrative in the years to come.

Africa is generally ignored when it comes to most types of investments, with the exception of the export of petroleum products, and in particular liquefied natural gas (LNG). The major LNG exporters in Africa are Algeria, Angola, Equatorial Guinea and Nigeria, with major LNG exporters potentially also including Mozambique, Tanzania and Kenya.

However, if fracking becomes as successful in other parts of the world as it has been in the United States, many countries will soon be able to find sufficient gas on their own (through fracking), which could mean the beginning of the end of LNG exports from Africa, and with it, the end of many of the present investments in Africa.

In fact, it has been suggested that fracking may be possible in India, China, Russia, Poland and Argentina, among other countries. If these countries could extract their own shale gas, there would be much less reliance on Africa and other LNG exporting regions.

According to a Telegraph article (and the Department of Energy and Climate Change), even the United Kingdom is predicted to have shale gas reserves worth about £1.5 trillion, with some of the reserves having the potential to be extracted through fracking.

While investors currently seem to have all eyes on investment opportunity in Africa, this may not be the case in the near future.

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NBC Hosts Democracy Plaza at 30 Rock, New Yorkers Join In Election Spirit

Rockefeller Center

New York — New Yorkers were buzzing with excitement at Rockefeller Center today, as the area had been transformed into “Democracy Plaza”, courtesy of NBC.

Javier Soto, who lives near Battery Park City in lower Manhattan, took the day off from his job in advertising to attend this event. “Election day is like the Super Bowl for me. I am more interested in this than the Super Bowl, so I always take the day off, watch the coverage and wait for the results,” said Soto.

Red, white and blue decorations covered Rockefeller Center, as crowds wove in and out of different activity booths stationed around the plaza.

Children drew caricatures of themselves with the presidential candidates on plasma screens, while others joined in mock newscasts, reading off a teleprompter as if they were real newscasters.

Many people stopped to watch the large television screens on the sides of buildings that were broadcasting past presidential speeches that had occurred at debates over the years.

Heather MacDonald, a physician’s assistant at a hospital in Manhattan, saw the event on the news in the morning, and decided to stop by. “I think it’s interesting they are playing these political statements from presidents in the past to sort of get everyone motivated. It’s colorful, it’s nice,” said MacDonald.

While MacDonald did not disclose whom she voted for, she did say it was a tough call this year, as she found herself switching between parties.

NBC’s Democracy Plaza

Soto voted for Obama and hopes he gets re-elected for a number of reasons. “For me, it has always been about foreign policy and social issues,” said Soto.

As NBC’s event placed a large emphasis on democracy, MacDonald admitted to feeling fortunate to be living in the US. “We all argue against each other when it comes time to vote, but at the end of the day, it’s nice we have the opportunity to vote. I waited in line for two and a half hours to vote today and everyone waited with me. No one left,” said MacDonald.

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Thousands are expected to appear in Rockefeller center later tonight, in order to watch coverage of the election. Rockefeller ice-skating rink will be lit up, as NBC will be projecting a map of the United States, with states turning red or blue as election results are announced.

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Wall Street Supports Romney, Bankers Feel Dodd-Frank Is Too Restrictive

New York Stock Exchange

Much of Wall Street is supporting Mitt Romney, who vows to repeal parts of the 2010 Dodd-Frank Act, which heavily regulates how the financial sector is run.

New York — Mitt Romney has won the support on Wall Street (despite the financial industry standing behind President Obama four years ago) thanks to his business experience and plan to loosen market regulation.

The top five donors to Romney’s campaign are global banks, four of which are American, with Goldman Sachs contributing the highest amount, $994,139, according to data from the Center for Responsive Politics. The only non-American bank is Credit Suisse, which is ranked fifth with a donation of $618,941.

By contrast, the top contributor to Obama’s campaign is the University of California, which donated about $1.1 million, followed by two tech giants, Microsoft Corp. and Google Inc.

Wall Street is most concerned with the Dodd-Frank Act, passed by Obama in 2010, which placed tighter regulations on banks. Obama recently said he wishes to reform the financial sector even further by changing the way those on Wall Street get compensated.

Romney, on the other hand, says he will repeal provisions of Dodd-Frank, if elected.

“Romney has a history as a very astute business man and it may be in the best interest of the financial industry if Romney takes office and makes some changes to the current status of Dodd-Frank,” said Greg Budetti, a financial analyst at Nomura Securities.

While Budetti believes the outline of Dodd-Frank is fair in the sense that banks needs to be transparent, he thinks the regulations are too restrictive.

“Protection for investors and consumers is very important but it seems as if these protective measures handcuff companies in some way,” Budetti said. “Obviously, I am all for following rules and regulations, but working in the financial industry, I also feel as if companies need to be able to run themselves in a true capitalist and free-market economy.”

Budetti’s feelings echo the sentiment of many working in the financial industry, who believe Obama has just not delivered and has, furthermore, placed unnecessary regulations on the financial sector.

“Obama has not proven that he is capable of getting this country out of its current state and has kind of treaded water without bringing his changes to life, but it will certainly take longer than four years to correct all of the problems in the U.S. economy,” said Budetti.

Budetti believes that no matter who is elected this evening, changes in the financial sector must be made. “Ideally, whoever is elected needs a plan to get American businesses back on the right path to being successful and promoting growth and stability within our economy,” said Budetti.

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NYC Small Businesses Split on Candidates

Max Dry Cleaners in the Financial District

For small business owners in New York’s Financial District, today’s vote is a toss-up between Romney’s business experience and Obama’s empathy.

New York — Down in the Financial District of New York City, small business owners have very different opinions on who they hope to see win today’s presidential election. Some believe Romney is out of touch with the small business community’s needs, while others think Obama has done little to show that he is.

Max Cleaners, a family-owned dry-cleaning store, has been in business in Manhattan’s financial district for seven years.

Julia Yoon, a recent college graduate, works at Max Cleaners to help her family with their business, until she is able to find another job. She hopes to see Obama win the election. “Romney doesn’t know what it feels like to actually run a small business,” said Yoon.

David Rakhminov, owner of Alex Tailor Shop, said Romney knows how to help small businesses, and would like to see him win. “Romney would be better for me. He is a businessman,” said Rakhminov, who has been tailoring clothes and designing custom-made garments in the heart of the Financial District since 1995.

Both the Romney and Obama campaigns largely show their support for small business growth. While Obama plans to broaden small business tax cuts, Romney wants to change the tight regulations presently in place for businesses to get off the ground in the first place.

One economic indicator, the SurePayroll Small Business Scorecard (which has been tracking the economic effects of small businesses since 2004), showed that in October small businesses had a 68 percent optimistic outlook on the economy helping their business.

Although Yoon wants to see Obama win, she doesn’t support his current tax policies, which have placed a strain on her family’s business. “We get taxed away like crazy, all of the small businesses do. We are all struggling to make a living and this is making it worse,” said Yoon.

The shaky economy under Obama has made it difficult for small businesses to feel confident enough to invest—despite Obama’s efforts to accelerate expensing for capital investments. Yoon said it’s too risky for Max Cleaners to make any capital investments, adding that the company should just stick with what it has for now.

“I feel like Obama didn’t do as much as he could have during his presidency, but Romney won’t be any better. I feel like it would be better to stick with Obama right now,” said Yoon.

Rakhminov agrees that Obama did not accomplish as much as he could have. Obama didn’t do much during the recession when people were losing their jobs and their homes, he said.

Yoon admitted that her family’s business greatly struggled during the recession, and still thinks times are tough. “It’s still pretty bad right now. I feel like if Romney comes in, he won’t know our situation as well as Obama does,” said Yoon.

However, Rakhminov’s business is back on its feet, as the economy has slowly been picking back up. “There was definitely a drop in business, but this year has actually been a lot better,” said Rakhminov.

 

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Multinational Automakers Help With Hurricane Sandy Damage

Multinational automakers, such as General Motors, Ford and Toyota have recently announced their plans to help with the damage caused by Hurricane Sandy.

According to an InsideLine article, General Motors said those whose cars were damaged or destroyed due to Hurricane Sandy, are now eligible to receive a $500 discount on cars purchased or leased, through the end of this year.

Toyota is offering different types of payment extensions to consumers whose cars were damaged in the storm. Toyota also donated $1 million to the American Red Cross, in the hopes of helping Hurricane Sandy victims. Volkswagen made a generous donation ($500,000) to the American Red Cross as well.  Ford has even implemented a bonus rewards program, offering $500 off a new Lincoln or Ford if purchased by January 2013.

Some companies are evening allowing their factories to be used as support centers. Fisker Automotive announced that its Wilmington, Delaware assembly plant is being used as base for utility trucks and power repair teams, while they work to reinstate power in the surrounding area.

Will these philanthropic automakers see an increase in sales in return for their charitable actions and donations? According to a MarketWatch article, although sales for October were a disappointment (as Hurricane Sandy brought sales numbers down in the last few days of October), the industry as a whole can expect to see a sharp rise in sales in the forthcoming months, as many cars will need to be newly purchased and replaced, due to extensive storm damage.

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Businesses Use Election-Themed Campaigns to Promote Products and Services

New York — Various businesses are currently utilizing the upcoming presidential election as a way to promote their own brands, products and services, through innovative election-themed marketing campaigns.

A number of companies, such as FedEx, Pizza Hut, Cabbage Patch Dolls, JetBlue Airlines, and Heaven Hill Distilleries (the company is marketing their “Red State Bourbon” and “Blue State Bourbon”) among others, have built extensive campaigns wrapped around the election.

Gyms have even jumped on the bandwagon. New York Sports Club recently launched their “Fit For Office” exercise campaign, complete with circuit-style workout stations, with names such as “Balancing The Budget”. Runners can also share their voting preferences, by choosing to run on either a blue-wrapped or red-wrapped treadmill.

As the election itself is a momentous event, companies are finding it wise to connect it with their marketing efforts. “Using current events, trends and highly visible social events, which engage a consumer’s interest, allow the brand to experience the awareness of these events, which heightens the brand’s product or service,” said New York University Professor Jonathan Banner, who teaches courses in marketing and public relations.

Companies are aware that many consumers have emotional associations with the election, and use that to their advantage. “The election-themed campaigns exploit two phenomena well understood by cognitive psychologists – issue salience and cognitive priming. Since the majority of consumers are engaged with the election and find the election an emotionally-charged event, they are likely to respond to any commercial message linked to the election,” said Professor Vladimir Pashkevich, who teaches courses in business management, marketing and public relations at Marymount Manhattan College.

Businesses must be able to generate constant awareness toward their election-themed campaign, in order for it to be the most profitable. “That awareness needs to be consistently rebuilt week after week and companies that are in high volume (and low-loyalty businesses) need to constantly reinforce that awareness in the mind of the consumer,” said Banner.

The success of a particular company’s marketing campaign in relation with the election simply depends on how well their campaign is implemented and how well it reaches their target demographic. “Each advertising execution is different and each brand has a different set of features, benefits, customers and goals,” said Banner.

Many of these election-themed campaigns tend to reach out to young voters, who in turn, tend to be skeptical of the company’s true intentions. Lauren Leyva, a sophomore at Marymount Manhattan College, believes that businesses should not use the election as a method of marketing their products. “I don’t think private companies should be getting involved in the election, or use it as a way of marketing. They have their own biases and their own motives,” said Leyva.

Despite the success of election-themed marketing campaigns throughout the weeks leading up to the election, the campaigns may not be as beneficial in generating long-term profit and popularity. “The individual’s interest in the business using election-themed messages may not outlast his or her enthusiasm for the election results being pursued at the moment. The business needs to be prepared to introduce another theme shortly after the election,” said Pashkevich.

 

 

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Update: Ecuador Files Lawsuit in Argentina, Hopes For $19 Billion

The rather messy and ongoing lawsuit involving Chevron’s operations in Ecuador seems to only be getting worse. The article I posted last week discussing the 18-year-long legal battle between the energy giant and the government of Ecuador talked about how the courts forced a documentarian to release over 600 hours of film outtakes to Chevron, to be used as evidence in the case (which did not end up helping Chevron all that much).

The case gained even more momentum yesterday, as Ecuadorian lawyers announced at a press conference in Buenos Aires, the newest location in which they will be suing Chevron: Argentina.

According to a Bloomberg article, Ecuador filed a lawsuit yesterday (and attachment order) in Argentina, in order to seize Chevron’s assets located in Argentina and receive the $19 billion in damages (a judgment which has yet to be enforced).

Bloomberg stated: “Chevron, based in San Ramon, California, on Oct. 9 lost a U.S. Supreme Court bid to block the judgment by an Ecuadorean court. The highest U.S. court let stand a federal appeals court ruling against Chevron that the Ecuadoreans can’t be barred from seeking to collect the award anywhere in the world.”

If Chevron loses the lawsuit in Argentina, the company could face dangerous consequences, as its assets in Argentina are extensive (being the fourth-largest producer of oil in Argentina). According to a RigZone article, Chevron’s assets in Argentina are expected to be around $2 billion. Ecuador is seeking approximately $21 billion from Chevron and is hoping that the Argentine courts can enforce this judgment.

 

 

 

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